A mixed complementarity-based equilibrium model for the international iron ore trade
We build a mixed complementarity-based equilibrium model to capture the strategic behavior of importers, exporters, and carriers. This model extends the previous literature by incorporating the trade market and the shipping sector into an equilibrium framework. For the trade market, we develop an improved imperfect competition model by introducing the market power of exporters. As for the shipping sector, we consider a two-level transportation optimization problem to refine the shipping sector into market segments, in which the same ship-type carriers on one sea route perfectly compete with each other. Since this model is an instance of Discretely Constrained Mixed Complementarity Problem (DC-MCP), we provide a solution procedure based on MINLP reformulation and convexification techniques. Using this model, we can simulate the interrelations of stakeholders in the international iron ore trade. As example, a case study based on the real data is conducted to evaluate the impact of large-size ship adoption in Brazilian iron ore exports to the iron ore trade volume.